The suspense is over! Governor-elect Eliot Spitzer has named one of his former subordinates to be New York's next insurance superintendent. Ironically, Eric R. Dinallo is currently in the insurance business, serving as general counsel of Willis Group Holdings. I never thought Mr. Spitzer would ever pick someone from the industry as his watchdog, but perhaps he let that slide because Mr. Dinallo hasn't been at Willis all that long, and this way the new regulator will have some first-hand experience on how the business operates.
As reported today by our own Mark Ruquet, Mr. Dinallo was chief of the Investment Protection Bureau for N.Y. Attorney General Eliot Spitzers office, in charge of a series of investigations into unethical practices of the financial services industry. Such unethical practices, of course, included bid-rigging and contingency fee abuse by major insurance brokers and carriers.
Mr. Dinallo served with the AG's office until September 2003, after which he joined Morgan Stanley as a managing director and head of regulatory matters. He took charge of legal and regulatory affairs globally for Willis just nine months ago.
The nominee had plenty of prosecutorial experience before he even joined Eliot's gang in 1999, serving as assistant district attorney in the New York County District Attorneys office.
I don't imagine the industry will be cut any slack under Mr. Dinallo. The industry is reacting positively (what choice do they have?), but remarks to the effect that the new superintendent no doubt understands that the misdeeds of a few rogue brokers and carriers do not reflect the widespread conduct of the entire industry might turn out to be wishful thinking. Who's to say he doesn't feel that investigators have only scratched the surface in insurance, and keep digging until he comes up with more dirt? He also most probably has a prosecutor's mentality–guilty until proven innocent, and suspicious of everyone–which could make life uncomfortable for the industry.
In addition, I can't help but wonder whether a few months working under Joe Plumeri, chairman and CEO for Willis, had an impact on how Mr. Dinallo thinks about contingency fees in general. After all, Mr. Plumeri has been outspoken for at least two years about how the system should be scrapped altogether and a level playing field for all producers established, much to the outrage of independent agent associations, who don't think it's fair that their members be penalized for the illegal deeds of their big brokerage brothers.
In any case, if you've done nothing wrong, you have nothing to fear. And if you have, you deserve whatever you get from the new superintendent and his boss.
What do you folks think about the choice?
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